<PAGE>
- BT INVESTMENT FUNDS -
INTERNATIONAL EQUITY FUND
SEMI-ANNUAL REPORT
------------------
MARCH-1997
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INTERNATIONAL EQUITY FUND
TABLE OF CONTENTS
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LETTER TO SHAREHOLDERS. . . . . . . . . . . . . . . . . . .3
INTERNATIONAL EQUITY FUND
Statement of Assets and Liabilities. . . . . . . . . . .7
Statement of Operations. . . . . . . . . . . . . . . . .7
Statement of Changes in Net Assets . . . . . . . . . . .8
Financial Highlights . . . . . . . . . . . . . . . . . .9
Notes to Financial Statements. . . . . . . . . . . . . 10
INTERNATIONAL EQUITY PORTFOLIO
Schedule of Portfolio Investments. . . . . . . . . . . 11
Statement of Assets and Liabilities. . . . . . . . . . 14
Statement of Operations. . . . . . . . . . . . . . . . 14
Statement of Changes in Net Assets . . . . . . . . . . 15
Financial Highlights . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements. . . . . . . . . . . . . 16
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INTERNATIONAL EQUITY FUND
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
We are pleased to present you with this semi-annual report for the International
Equity Fund, providing a review of the markets, the Portfolio, and our outlook,
as well as a complete financial summary of the Fund's operations and a listing
of the Portfolio's holdings.
The International Equity Fund (the "Fund") had a total return of 11.43%* for the
semi-annual period ended March 31, 1997, as compared to 0.15% for the Morgan
Stanley Capital International ("MSCI") EAFE Index** and 5.33% for the Lipper
International Equity Funds Average+. Since its inception on August 4, 1992, the
Fund has returned 104.09% cumulatively, or 16.56% annualized. The Fund returned
19.25% for the year ended March 31, 1997.
MARKET ACTIVITY
Overhanging the international markets during the Fund's semi-annual period was
the increasing expectation that the U.S. Federal Reserve Board would raise
interest rates to quell nascent inflation pressures. The Fed finally took
action on March 25, 1997, increasing the Fed Funds rate by 0.25% to 5.50%.
Although most international markets responded well initially, a groundswell of
negative sentiment began to form right at the end of the second calendar
quarter. The extent of concern may not be known until it becomes clear if and
when further tightening of U.S. monetary policy will take place.
OBJECTIVE
Seeks long term capital appreciation from investments in foreign
equity securities or other securities with equity characteristics.++
EUROPE
Most European bourses soundly outperformed the soaring U.S. market for the six
months ended March 31, 1997, as investors sought exposure to the region's
attractive relative valuations and positive earnings momentum. Although much of
continental Europe has been plagued by post-war high unemployment levels, loose
monetary policy and export-led growth are beginning to have a positive effect on
many economies. A stronger greenback eroded much of the gain in U.S. dollar
terms, but this served to highlight the competitive currency advantage many
European firms now enjoy relative to their U.S. counterparts.
Europe continued to be led by the peripheral markets--Spain, Sweden, Norway and
Finland; however, France and Germany also posted stellar half-year performance.
European Monetary Union convergence initially thrust Italy and Spain into the
spotlight, as domestic investors sought better returns from equity markets
rather than from the falling risk-free returns offered in government bonds.
While Spain was able to ride this surge, Italy began to lag during the latter
part of the period, as fears that it might not meet convergence requirements led
to a sell-off in the Italian lira and in the Italian stock and bond markets.
INVESTMENT INSTRUMENTS
Equity securities of foreign issuers, consisting of common stock and
other securities with equity characteristics; the investments are
diversified among several regions.
Many of the elements that brought the United Kingdom out of similar straits
several years back-including a depreciating currency, industrial restructuring,
and low real interest rates-are expected to bring the continent strongly
forward. In time, this should lead to a shift from the export sector to
industries that are more sensitive to local and regional economic activity. As
the U.K.'s economic and market cycles mature, concerns are now centering on an
impending change in government, the harmful effects of a strengthening currency,
and the likelihood of a further interest rate rise.
Portugal, which is not a component of MSCI EAFE, ranked among the top performers
both in local currency and dollar terms. It has undergone a dramatic re-rating
as a beneficiary of its European Union membership, and despite its sharp rise,
should continue to offer investors one of the most attractive valuations in
Europe.
ASIA
Japan has become a bifurcated market, where weak yen beneficiaries have soared,
while the financial sector and domestic-sensitive stocks have suffered. Many
exporters, which wisely restructured to improve competitiveness and efficiency
during the period of yen strengthening, are now enjoying sharply higher
earnings, as the weaker yen boosts sales. Still, such successes have been
overshadowed by concerns over the domestic economy and uncertainties in the
banking and real estate sectors. The Nikkei, Japan's leading equity index,
plummeted nearly 20% based on concerns that the increase in the consumption tax
would depress economic activity. Scandals in the brokerage industry and the
fear that healthy banks would be called upon to prop up the Nippon Credit Bank
and other ailing banks shaved almost one-third of the value off the Topix bank
index.
Ten Largest Stock Holdings
-----------------------------------------------------------------
Telecel Comunicacaoes Pessoais British Aerospace Plc.
adidas AG Volkswagen AG
KCI Konecranes Intl. Corp. UPM - Kymmene Corp.
Internationale Nederlanden Groep NV Michelin-B
Christian Dior Barclays Plc.
In other Pacific markets, Australia, Indonesia, and Malaysia performed well, but
their gains were offset by the sharp pullbacks in Thailand and South Korea.
Thailand lost more than one-third of its value during the semi-annual period due
to deteriorating conditions in the property and financial sectors, years of
over-investment facilitated by cheap funds, and renewed worries over potential
currency devaluation. The Thai crisis has prompted other governments and
investors in the region to take steps to prevent the same from happening there.
South Korea suffers from a high current account deficit, downturns in most of
its cyclical industries, and a loss of com-
- --------------------
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** Indexes are unmanaged, and investments cannot be made in an index.
+ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated. These figures do not
reflect sales charges.
++ Foreign investing involves special risks, including currency risk,
increased volatility or foreign securities and differences in auditing and
other financial standards.
3
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INTERNATIONAL EQUITY FUND
LETTER TO SHAREHOLDERS (CONTINUED)
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petitiveness against Japan. Singapore is still lackluster due to weaker than
expected non-oil export growth so far in 1997. The combination of soaring
property prices and higher U.S. interest rates led to a retrenchment in the Hong
Kong market after substantial gains. Deng's passing in February was very well
absorbed by the market.
Overall, Asia still faces a tough export environment, given the continued
strength of the U.S. dollar, falling domestic trade barriers, and the weak
electronics sector upon which the region is so dependent.
OTHER MARKETS
The Canadian equity market registered strong gains on the back of an improving
domestic economy, low interest rates, and benign inflation. The nation now
leads the G-7 in economic growth and is in the early stages of a mutual fund
boom similar to that seen in the U.S. Most Latin American markets performed
well during the period, with Brazil leading the way. After a free fall in 1996,
the South African rand has staged a recovery and seems to be stabilizing in
1997. During the Fund's semi-annual period, the South African market's dollar
returns have been quite good, but slower growth may dampen expectations through
the remainder of the year.
Russia has come a long way in generating support for economic reform both at
home and abroad as a result of Yeltsin's reconsolidation of power and the
appointment of a young, dynamic, reform-oriented cabinet. Though the nation
must work its way out of the current recession, its focus on domestic private
industrial development, relative stability in the ruble, and its rich resource
sector led its market sharply upwards.
INVESTMENT REVIEW
We increased the Fund's overweight position in Europe, with a bias towards the
continent, its peripheral markets, particularly Portugal, and France, while
remaining underweight in the U.K. and Germany. We reduced the Fund's exposure
to Japan, and while remaining overweight in Hong Kong, we have pared back our
exposure there. We have substantially increased the Fund's weightings in
Canada, in part by drawing down our cash position from 9% to 5%. As an offset
to this overall Fund weighting and to offer some protection from high market
volatility, the Fund purchased a put option on a basket of European markets and
a call option on both the Nikkei and a basket of Japanese city banks.
In Europe, the Fund favors companies focused on restructuring and market-driven
opportunities. We also continue to find compelling values in some defensive and
interest rate sensitive sectors, such as energy, financial services, and
telecommunications. During the period, we added Dexia, the bank holding company
formed by the merger of Credit Local de France and Credit Communal de Belgique.
We believe this company is very well positioned to capture municipal financing
opportunities throughout Europe. We expect to see more cross border mergers, as
European firms team up to be better able to succeed in a unified Europe.
In Switzerland, we added Zurich Insurance, personnel company Adecco, and
Novartis, the merger of pharmaceutical powerhouses Sandoz and Ciba-Geigy.
French financials are now showing signs of recovery after a prolonged period of
asset price deflation due to overpriced property holdings. We added the world's
second largest insurance company and one of the world's largest investment
groups after its merger, AXA-UAP. Diversified banking group BNP, energy company
Elf Acquitaine, and tire maker Michelin were also added to the Portfolio.
We increased the Fund's weighting in telecommunications, keeping it concentrated
in the fast-growing Southern European markets. The Fund participated in the
Portuguese government's sale of Portugal Telecom and added the nation's leading
provider of mobile phone services, Telecel, upon its initial public offering.
The Fund also added Telefonica de Espana, one of Europe's fastest growing
telecommunications companies, which benefits from a strategic position in Latin
America. We participated in the initial offering of Deutsche Telekom, Europe's
largest privatization ever, but sold the shares shortly thereafter when it
achieved our price target.
The Fund increased its weighting in some economically-sensitive restructuring
plays within continental Europe as well. Specifically, we added Daimler-Benz
and Thyssen, both with management teams successful at restructuring and
enhancing core businesses. We also added Hoogovens in the Netherlands, one of
the most efficient global steel producers, and Finland's UPM-Kymmene, Europe's
largest paper company, which is expected to benefit from a turnaround in the
paper cycle and improved industry dynamics. We took profits in Germany's
diversified chemical producer, BASF, after it achieved our price target.
In the United Kingdom, we continued to pursue companies committed to enhancing
shareholder value, such as Barclays, British Aerospace, and British Land. We
also participated in the initial public offering of Avis Europe plc, the U.K.-
headquartered car rental company with excellent prospects in Europe, Africa, and
the Middle East, and Colt Telecom, a competitive local network operator in
Europe. We sold our position in BBA Group due to anticipated weakness in its
core businesses, and we used the proceeds to increase our exposure to Rolls
Royce. We took profits in Powerscreen, a construction equipment company, but
retained its better-valued Swedish competitor, Svedala. We sold the Fund's
positions in the food retailer Iceland due to lackluster earnings prospects and
in MFI Furniture, as it failed to benefit from recovery in the housing sector.
We reduced the Fund's Japanese exposure through the sale of domestic-sensitive
stocks. These included Mitsubishi Estate, Sumitomo Realty, Obayashi Corp., and
Sumitomo Metal. Even with our cautious stance here, we see many appealing
values among Japanese industrials that have either undergone profound
restructuring during the period of yen strengthening or become sufficiently
global to provide insulation against domestic economic weakness. We added
Nintendo, Takeda Chemical, and Sankyo.
We pared back the Fund's overweighting in Hong Kong, substituting more direct
Chinese infrastructure plays such as Beijing Datang Power and Shenzhen
Expressway. Other major Portfolio changes in the region include lowering the
weightings in Singapore and Thailand, purchasing life insurance companies in
Indonesia and Malaysia, and adding food companies in Australia and Hong Kong.
We added to India with VSNL, the monopoly international long distance phone
company.
4
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INTERNATIONAL EQUITY FUND
LETTER TO SHAREHOLDERS (CONTINUED)
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DIVERSIFICATION OF PORTFOLIO INVESTMENTS
By Country as of March 31, 1997
(PERCENTAGES ARE BASED ON MARKET VALUE)
[PIE CHART]
Treasury Bills and other items 6%
Germany 7%
Japan 9%
United Kingdom 11%
France 14%
Italy 6%
Hong Kong 6%
Spain 4%
Netherlands 4%
Other 33%+
- --------------------
+ Includes countries with weightings of less than 4%.
We purchased Royal Bank and Bank of Montreal, two of Canada's leading banks,
which are benefiting from growth in the domestic mutual fund business. In
Russia, we purchased Tatneft, the nation's fourth largest oil and gas company
and an adherent to U.S. accounting procedures.
MANAGER OUTLOOK
International markets are noted for their historically low correlation to the
U.S., an important diversification benefit for American investors. However,
events in the U.S. can and do have a profound short-term effect on foreign
markets. For example, during the days leading up to and following the decision
of the Federal Reserve Board to raise short-term interest rates, sell-offs both
in the U.S. and abroad took place. Markets that did not participate in the
sharp run-up in December and into 1997 were spared a stinging decline, while
those that rose quickly saw much of their gains erased. Foreign markets are
likely to continue their volatility as U.S. rates rise, but may well be helped
by a continuing strong dollar. Importantly, many markets will probably reflect
their distinctly later cycle economies with output gaps supporting ongoing loose
monetary policy.
Although alternating euphoria and pessimism regarding economic and monetary
union are likely to lead to greater volatility in European markets, the path set
and the measures taken convince us that unification will occur. If core markets
continue their progress in industrial restructuring and return to stronger
growth without domestic interest rate and inflation pressures, we foresee more
attractive returns than elsewhere in the industrialized world. Exceptions
include the U.K. and the Netherlands, which are more advanced in their
respective economic and market cycles and are likely to experience resistance
making much near-term progress. Though high yield gives the U.K. defensive
characteristics in a volatile market environment, we are likely to continue to
seek investments there on an opportunistic basis.
We remain cautious about the longer-term prospects for financial and real estate
market reform in Japan, however, we believe that recent efforts to address these
issues may result in short-term gains there. These efforts along with its
restructured and re-profitable export industries lead us to believe that, of all
the major markets in the world, Japan may offer the greatest potential to
provide a near-term upside surprise.
In Asia ex-Japan, volatility will likely be high in 1997, given the uncertainty
of further interest rate hikes in the U.S., the deteriorating export
competitiveness of the region, and the persistence of structural problems
resulting from over-investment in certain countries. Still, we continue to
favor Hong Kong, since China's growing economy will partially offset the
negative effects of higher U.S. rates. In fact, China's having recently
achieved a virtual soft landing is leading us to expect a decrease in interest
rates later in the year, clearly running counter to the U.S. cycle. Due to
their lack of correlation with U.S. interest rates, the Fund's weightings in
India, Indonesia, the Philippines, and Taiwan should also help to mitigate the
interest rate sensitivity of its holdings in the Asian region.
We will, of course, continue monitoring economic conditions and how they affect
the financial markets, as we seek long-term capital appreciation.
We value your ongoing support of the International Equity Fund and look forward
to continuing to serve your investment needs in the years ahead.
/s/ Michael Levy
/s/ Robert Reiner
/s/ Julie Wang
Michael Levy, Robert Reiner and Julie Wang
Portfolio Managers of the
International Equity Portfolio
March 31, 1997
5
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INTERNATIONAL EQUITY FUND
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in the International
Equity Fund and the Morgan Stanley Capital International EAFE Index since
August 31, 1992.
- --------------------------------------------------------------------------------
Total Return for the Period
Ended March 31, 1997
Six months Since 8/4/92*
11.43% 104.09%
* The Fund's inception date.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
[ LINE CHART ]
International Equity Fund - $20,108
MSCI EAFE Index - $15,630
Aug-92 10000 10000
Sep-92 9665 9803
Dec-92 9606 9424
Mar-93 10424 10554
Jun-93 11084 11615
Sep-93 11944 12386
Dec-93 13196 12493
Mar-94 13717 12930
Jun-94 13266 13590
Sep-94 13977 13603
Dec-94 13738 13465
Mar-95 14046 13715
Jun-95 14961 13815
Sep-95 15911 14391
Dec-95 15950 14974
Mar-96 16862 15406
Jun-96 17881 15650
Sep-96 18057 15630
Dec-96 19349 15879
Mar-97 20108 15630
Past performance is not indicative of future performance.
6
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INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in International Equity Portfolio, at Value. . . $ 282,180,890
Receivable for Shares of Beneficial Interest Subscribed . . 775,577
Prepaid Expenses and Other. . . . . . . . . . . . . . . . . 14,021
--------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . 282,970,488
--------------
LIABILITIES
Due to Bankers Trust. . . . . . . . . . . . . . . . . . . . 184,337
Payable for Shares of Beneficial Interest Redeemed. . . . . 946,333
Accrued Expenses and Other. . . . . . . . . . . . . . . . . 19,660
--------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . 1,150,330
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 281,820,158
--------------
--------------
COMPOSITION OF NET ASSETS
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . $ 238,679,733
Accumulated Net Investment Loss . . . . . . . . . . . . . . (1,655,301)
Accumulated Net Realized Gain from Investment and Foreign
Currency Transactions . . . . . . . . . . . . . . . . . . . 6,104,670
Net Unrealized Appreciation on Investments, Foreign
Currencies and Forward Foreign Currency Contracts . . . . . 38,691,056
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 281,820,158
--------------
--------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(net assets divided by shares outstanding) . . . . . . . . . . $ 18.30
--------------
--------------
SHARES OUTSTANDING ($0.001 par value per share, unlimited
number of shares of beneficial interest authorized). . . . . . 15,399,224
--------------
--------------
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income Allocated from International Equity Portfolio, net . $ 925,721
--------------
EXPENSES
Administration and Services Fees. . . . . . . . . . . . . . 920,726
Printing and Shareholder Reports. . . . . . . . . . . . . . 16,634
Registration Fees . . . . . . . . . . . . . . . . . . . . . 8,302
Professional Fees . . . . . . . . . . . . . . . . . . . . . 5,459
Trustees Fees . . . . . . . . . . . . . . . . . . . . . . . 1,364
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 2,577
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . 955,062
Less Expenses Absorbed by Bankers Trust . . . . . . . . . . (34,336)
--------------
Net Expenses. . . . . . . . . . . . . . . . . . . . . . 920,726
--------------
Net Investment Income. . . . . . . . . . . . . . . . . . . . . 4,995
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND
FORWARD FOREIGN CURRENCY CONTRACTS
Net Realized Gain (Loss) from:
Investment Transactions . . . . . . . . . . . . . . . . (1,419,820)
Foreign Currency Transactions . . . . . . . . . . . . . 3,978,886
Net Change in Unrealized Appreciation on Investments,
Foreign Currencies and Forward Foreign Currency Contracts . 18,934,347
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS, FOREIGN
CURRENCIES AND FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . 21,493,413
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . $ 21,498,408
--------------
--------------
See Notes to Financial Statements on Page 10
7
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INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997+ SEPTEMBER 30, 1996
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income . . . . . . . . . . . $ 4,995 $ 1,050,869
Net Realized Gain from Investment and
Foreign Currency Transactions. . . . . . . 2,559,066 6,080,697
Net Change in Unrealized Appreciation on
Investments, Foreign Currencies and
Forward Foreign Currency Contracts . . . . 18,934,347 7,989,401
----------- ------------
Net Increase in Net Assets from Operations . . 21,498,408 15,120,967
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income . . . . . . . . . . . (1,830,717) (1,680,074)
Net Realized Gain from Investment
Transactions . . . . . . . . . . . . . . . (2,241,298) (2,218,709)
----------- ------------
TOTAL DISTRIBUTIONS. . . . . . . . . . . . . . (4,072,015) (3,898,783)
----------- ------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from Sales of Shares . . . . . . . 128,438,040 98,926,188
Dividend Reinvestments. . . . . . . . . . . 2,950,802 2,166,771
Cost of Shares Redeemed . . . . . . . . . . (28,686,723) (33,430,708)
----------- ------------
NET INCREASE FROM CAPITAL TRANSACTIONS IN
SHARES OF BENEFICIAL INTEREST . . . . . . . . 102,702,119 67,662,251
----------- ------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . 120,128,512 78,884,435
NET ASSETS
Beginning of Period. . . . . . . . . . . . . . 161,691,646 82,807,211
----------- ------------
End of Period (includes accumulated net
investment income (loss) of $(1,655,301) and
$170,421, respectively). . . . . . . . . . . .$281,820,158 $161,691,646
------------ ------------
------------ ------------
- ------------------------
+ Unaudited
See Notes to Financial Statements on Page 10
8
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INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the
periods indicated for the International Equity Fund.
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE FOR THE PERIOD YEAR ENDED
SIX MONTHS ENDED YEAR ENDED JANUARY 1, 1995 TO DECEMBER 31,
MARCH 31, 1997+ SEPTEMBER 30, 1995 SEPTEMBER 30, 1995* 1994 1993
---------------- ------------------ ------------------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $ 16.77 $ 15.47 $ 13.37 $ 13.18 $ 9.75
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . (0.15) 0.18 0.14 0.10 0.05
Net Realized and Unrealized Gain on Investments,
Foreign Currencies and Forward Foreign
Currency Contracts. . . . . . . . . . . . . . 2.04 1.80 1.97 0.44 3.60
-------- -------- ------- ------- -------
Total from Investment Operations . . . . . . . . . 1.89 1.98 2.11 0.54 3.65
-------- -------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income . . . . . . . . . . . . . (0.16) (0.31) (0.00) (0.09) (0.15)
Net Realized Gain from Investment Transactions. (0.20) (0.37) (0.01) (0.26) (0.07)
-------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . . . (0.36) (0.68) (0.01) (0.35) (0.22)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $ 18.30 $ 16.77 $ 15.47 $ 13.37 $ 13.18
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . 11.43% 13.42% 15.82% 4.12% 37.38%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted). . . . $281,820 $161,692 $82,807 $56,020 $33,869
Ratios to Average Net Assets:
Net Investment Income . . . . . . . . . . . . 0.00%**++ 0.91% 1.55%** 0.84% 0.79%
Expenses, Including Expenses of the
International Equity Portfolio. . . . . . . . 1.50%** 1.50% 1.50%** 1.50% 1.50%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust . . . . . . . . . . . . . . . 0.20%** 0.26% 0.33%** 0.37% 0.62%
</TABLE>
- ---------------------
+ Unaudited
++ Less than 0.01%
* On August 2, 1995, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
** Annualized
See Notes to Financial Statements on Page 10
9
<PAGE>
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INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
BT Investment Funds (the "Trust") is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a business trust under the laws of
the Commonwealth of Massachusetts. The International Equity Fund (the "Fund") is
one of the funds offered to investors by the Trust. The Fund commenced
operations and began offering shares of beneficial interest on August 4, 1992.
The Fund invests substantially all of its assets in the International Equity
Portfolio (the "Portfolio"). The Portfolio is an open-end management investment
company registered under the Act. The Fund seeks to achieve its investment
objective by investing all of its investable assets in the Portfolio. The value
of such investment in the Portfolio reflects the Fund's proportionate interest
in the net assets of the Portfolio. At March 31, 1997, the Fund's investment was
99.99% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report.
B. INVESTMENT INCOME
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from the security transactions of the Portfolio are allocated pro
rata among the investors in the Portfolio at the time of such determination.
C. DIVIDENDS
It is the Fund's policy to declare and distribute dividends annually to
shareholders from net investment income, if any. Dividends and distributions
payable to shareholders are recorded by the Fund on the ex-dividend date.
Distributions of net realized short-term and long-term capital gains, if any,
earned by the Fund will also be made annually.
D. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute substantially
all of its taxable income to shareholders. Therefore, no federal income tax
provision is required.
E. OTHER
The Trust accounts separately for the assets, liabilities, and operations of the
Fund. Expenses directly attributable to the Fund are charged to that Fund, while
expenses which are attributable to all of the Trust's Funds are allocated among
them.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements.
NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of 0.85 of 1% of the Fund's average daily net assets.
For the six months ended March 31, 1997, this fee aggregated $920,726.
The Trust entered into a Distribution Agreement with Edgewood Services, Inc.
("Edgewood"). Under the Distribution Agreement with the Trust, pursuant to Rule
12b-1 of the 1940 Act, Edgewood may seek reimbursement, at an annual rate not
exceeding 0.20 of 1% of the Fund's average daily net assets, for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares. For the six months ended March 31, 1997, there were
no reimbursable expenses incurred under this agreement.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Fund, to the extent necessary, to limit all expenses to 0.85 of 1% of the
average daily net assets of the Fund, excluding expenses of the Portfolio and
1.50 of 1% of the average daily net assets of the Fund, including expenses of
the Portfolio. For the six months ended March 31, 1997, expenses of the Fund
have been reduced by $34,336.
Certain trustees and officers of the Fund are also directors, officers and/or
employees of Edgewood. None of the trustees so affiliated received compensation
for services as trustee of the Fund. Similarly, none of the Fund's officers
received compensation from the Fund.
NOTE 3--SHARES OF BENEFICIAL INTEREST
At March 31, 1997, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 (UNAUDITED) SEPTEMBER 30, 1996
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------- -------------
Sold 7,188,046 $ 128,438,040 6,278,513 $ 98,926,188
Reinvested 173,986 2,950,802 146,008 2,166,771
Redeemed (1,604,096) (28,686,723) (2,134,450) (33,430,708)
----------- ------------- ------------- -------------
Net Increase 5,757,936 $ 102,702,119 4,290,071 $ 67,662,251
----------- ------------- ------------- -------------
----------- ------------- ------------- -------------
10
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
COMMON STOCKS - 92.89%
AUSTRALIA - 2.38%
265,000 Aristocrat Leisure (Leisure) . . . . . . . . $ 560,881
307,300 Capral Aluminum Ltd. (Diversified) . . . . . 1,137,012
826,000 Goodman Fielder Ltd. (Food). . . . . . . . . 1,068,377
1,350,500 National Mutual Holdings Ltd. (Insurance). . 2,053,795
207,476 News Corporation (Services). . . . . . . . . 967,711
200,000 TABCORP Holdings Ltd. (Leisure). . . . . . . 914,027
----------------
6,701,803
----------------
AUSTRIA - 0.75%
17,800 OMV AG (Energy). . . . . . . . . . . . . . . 2,116,936
----------------
BELGIUM - 0.98%
25,000 Credit Communal Holding/Dexia (Banks) (a). . 2,772,905
----------------
BRAZIL - 0.31%
8,600,000 Telec Brasileiras-Telebras
(Telecommunications) (a). . . . . . . . . . 866,083
----------------
CANADA - 3.36%
68,400 Bank of Montreal (Banks) . . . . . . . . . . 2,423,583
77,500 Canadian Natural Resources Ltd.
(Oil and Gas) (a) . . . . . . . . . . . . . 1,879,298
70,700 Newcourt Credit Group, Inc. (Finance) (a). . 2,819,812
60,600 Royal Bank of Canada (Banks) . . . . . . . . 2,357,763
----------------
9,480,456
----------------
CHINA - 1.40%
4,600,000 Beijing Datang Power Generation Co. Ltd.
(Utilities) (a) . . . . . . . . . . . . . . 1,840,237
1,410,000 Guangshen Railway Company Ltd.
(Transportation) (a). . . . . . . . . . . . 609,563
4,810,000 Shenzhen Expressway Co. (Utilities) (a). . . 1,505,259
----------------
3,955,059
----------------
FINLAND - 3.48%
97,900 KCI Konecranes International Corp.
(Capital Equipment) . . . . . . . . . . . . 3,854,487
43,400 Nokia AB ADR-A (Telecommunications). . . . . 2,528,050
155,100 UPM-Kymmene Corp. (Banks) (a). . . . . . . . 3,429,060
----------------
9,811,597
----------------
FRANCE - 13.56%
18,400 Accor SA (Leisure) . . . . . . . . . . . . . 2,674,105
37,300 Assurances Generales de France (Finance) . . 1,363,834
42,800 AXA - UAP(Insurance) (a) . . . . . . . . . . 2,831,028
62,500 Banque Nationale de Paris (Banks) (a). . . . 2,777,161
24,400 Christian Dior (Consumer Goods). . . . . . . 3,728,169
15,417 Compagnie Generale des Eaux (Diversified). . 2,095,408
51,700 Dassault Systemes SA (Computer Software) (a) 2,995,369
27,900 Elf Aquitaine (Oil and Gas) (a). . . . . . . 2,860,140
13,400 Groupe Danone (Food) (a) . . . . . . . . . . 2,123,621
26,944 Lyonnaise des Eaux-Dumez (Diversified) . . . 2,752,563
57,100 Michelin - B (Autos) (a) . . . . . . . . . . 3,393,435
7,900 Pathe SA (Services) (a). . . . . . . . . . . 2,021,142
35,600 Schneider S.A. (Capital Equipment) . . . . . 2,036,635
37,300 SGS-Thomson Microelectronics NV
(Semiconductors) (a). . . . . . . . . . . . 2,466,463
24,800 Total SA-B (Oil and Gas) . . . . . . . . . . 2,145,353
----------------
38,264,426
----------------
GERMANY - 6.80%
35,300 adidas AG (Consumer Goods) (b) . . . . . . . 4,009,440
6,500 Berliner Kraft & Licht (Utilities) . . . . . 1,788,240
36,000 Daimler-Benz AG (Autos) (a). . . . . . . . . 2,878,446
12,700 SAP AG-Vorzug (Computer Software) (a). . . . 2,177,056
19,000 SGL Carbon AG (Materials) (a). . . . . . . . 2,607,888
9,900 Thyssen AG (Engineering) . . . . . . . . . . 2,234,087
6,300 Volkswagen AG (Autos). . . . . . . . . . . . 3,481,539
----------------
19,176,696
----------------
HONG KONG - 5.55%
737,000 Amoy Properties Ltd. (Real Estate) (a) . . . 779,894
277,200 Bank of East Asia Ltd. (Banks) . . . . . . . 940,813
797,000 CDL Hotels International (Leisure) . . . . . 393,409
127,000 Cheung Kong Holdings Ltd. (Real Estate). . . 1,118,564
2,058,000 China Resources Beijing Land (Real Estate) (a) 1,288,076
805,000 China Resources Enterprises Ltd. (Diversified) 1,734,869
662,000 Giordano International Ltd. (Consumer Goods) (a) 401,523
1,056,000 Guangnan Holdings (Food) . . . . . . . . . . 1,369,570
166,000 Hutchison Whampoa Ltd. (Diversified) . . . . 1,247,838
340,000 Lai Sun Development Co. Ltd. (Real Estate) . 394,890
1,350,000 NG Fung Hong (Food) (a). . . . . . . . . . . 1,472,125
626,000 Shanghai Industrial Holdings Ltd.
(Diversified) (a) . . . . . . . . . . . . . 2,746,677
1,420,000 Texwinca Holdings Ltd. (Consumer Goods) (a). 1,172,796
1,856,000 Theme International Holdings Ltd.
(Consumer Goods). . . . . . . . . . . . . . 604,775
----------------
15,665,819
----------------
INDIA - 0.71%
113,600 Videsh Sanchar Nigam Ltd., GDR
(Telecommunications) (a) . . . . . . . . . 2,005,040
----------------
INDONESIA - 1.71%
1,172,500 Bank Dagang Nasional PT (Banks) (a). . . . . 1,172,012
217,500 Bukaka Teknik Utama PT (Capital Equipment) (a) 140,410
498,000 Citra Marga Nusaphala Persada PT
(Utilities) (a) . . . . . . . . . . . . . . 445,939
545,000 Fiskaragung Perkasa PT (Food) (a). . . . . . 822,834
414,000 Kalbe Farma PT (Pharmaceuticals) (a) . . . . 465,556
564,000 Lippo Life Insurance PT (Insurance) (a). . . 610,746
365,000 Ramayana Lestari Sentosa PT (Retail) (a) . . 851,312
265,200 Steady Safe PT (Transportation) (a). . . . . 314,794
----------------
4,823,603
----------------
IRELAND - 1.94%
277,500 Bank of Ireland (Banks). . . . . . . . . . . 2,777,095
275,200 CRH Plc. (Materials) . . . . . . . . . . . . 2,710,362
----------------
5,487,457
----------------
ITALY - 5.99%
385,900 Autostrade Concessioni E Costruzioni-
Autostrade SPA (Transportation) (a). . . . 800,368
122,900 Banca Nazionale del Lavoro (Banks) (a) . . . 1,103,209
75,000 Bulgari SPA (Consumer Goods) (a) . . . . . . 1,436,386
2,054,600 Credito Italiano (Banks) . . . . . . . . . . 2,918,868
546,600 Ente Nazionale Idrocarburi - ENI SPA
(Oil and Gas) (a) . . . . . . . . . . . . . 2,776,823
18,000 Gucci Group NV (Consumer Goods) (a). . . . . 1,298,250
560,000 IFIL Finanziaria di Partecipazioni SPA
(Finance) (a) . . . . . . . . . . . . . . . 1,047,325
1,229,750 Parmalat Finanziaria SPA (Food) (a). . . . . 1,706,502
62,000 Safilo SPA (Consumer Goods) (a). . . . . . . 1,135,381
612,400 Societa Finanziaria Telefonica SPA
(Services). . . . . . . . . . . . . . . . . 2,676,095
----------------
16,899,207
----------------
See Notes to Financial Statements on Pages 16 and 17
11
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
JAPAN - 8.77%
92,600 AJL Peps Trust (Consumer Goods). . . . . . . $ 1,458,450
86,000 Canon, Inc.(Capital Equipment) . . . . . . . 1,840,724
280 East Japan Railway Co. (Transportation). . . 1,142,073
205,000 Hitachi Ltd. (Capital Equipment) . . . . . . 1,821,339
67,000 JUSCO Co. (Services) . . . . . . . . . . . . 1,839,916
237,000 Mitsubishi Heavy Industry Ltd.
(Capital Equipment) . . . . . . . . . . . . 1,540,950
40,500 Nintendo Corp. Ltd. (Consumer Goods) . . . . 2,904,773
100,000 Sankyo Co. (Pharmaceuticals) . . . . . . . . 2,754,220
39,600 Sony Corp. (Consumer Goods). . . . . . . . . 2,766,659
145,000 Takashimaya Co. (Retail) . . . . . . . . . . 1,393,668
136,000 Takeda Chemical Industries (Pharmaceuticals) 2,845,004
96,000 Toyota Motor Corp. (Autos) . . . . . . . . . 2,426,944
----------------
24,734,720
----------------
MALAYSIA - 2.53%
795,000 Berjaya Group BHD (Diversified) (a). . . . . 961,965
183,333 Kentucky Fried Chicken (Food) (a). . . . . . 857,767
183,000 Malaysia Assurance Alliance BHD
(Insurance) (a) . . . . . . . . . . . . . . 1,055,499
495,000 Multi-Purpose Holdings BHD
(Diversified) (a) . . . . . . . . . . . . . 1,038,196
102,000 Perusahaan Otomobil Nasional BHD (Autos) . . 645,908
316,000 R. J. Reynolds BHD (Tobacco) (a) . . . . . . 777,478
279,400 Sungei Way Holdings (Materials). . . . . . . 766,313
188,000 UMW Holdings BHD (Autos) . . . . . . . . . . 1,038,842
----------------
7,141,968
----------------
NETHERLANDS - 4.31%
97,250 Internationale Nederlanden Groep NV
(Finance) . . . . . . . . . . . . . . . . . 3,831,312
38,000 Koninklijke Ahold NV (Retail). . . . . . . . 2,647,724
60,600 Koninklijke Nederlandsche Hoogovens en
Staalfabrieken NV (Materials) . . . . . . . 2,998,017
57,300 Philips Electronics NV (Consumer Goods). . . 2,672,859
----------------
12,149,912
----------------
PHILIPPINES - 1.16%
3,720,000 Belle Corp. (Leisure) (a). . . . . . . . . . 1,185,208
29,000 Equitable Banking Corp. (Banks) (a). . . . . 124,643
2,478,000 Filinvest Land, Inc. (Real Estate) (a) . . . 789,501
34,584 Metropolitan Bank & Trust Co. (Banks) (a). . 898,541
616,400 Universal Robina Corp. (Food) (a). . . . . . 280,554
----------------
3,278,447
----------------
PORTUGAL - 2.77%
55,000 Cimpor-Cimentos de Portugal SA
(Materials) (a) . . . . . . . . . . . . . . 1,150,751
69,000 Portugal Telecom SA (Telecommunications) (a) 2,568,580
50,000 Telecel-Comunicacaoes Pessoais, SA
(Telecommunications) (a). . . . . . . . . . 4,098,117
----------------
7,817,448
----------------
RUSSIA - 1.09%
31,800 Gazprom ADR (Oil and Gas) (a) (b). . . . . . 529,470
37,000 Tatneft ADR (Oil and Gas) (a) (b). . . . . . 2,553,000
----------------
3,082,470
----------------
SINGAPORE - 0.28%
67,000 Development Bank of Singapore Ltd. (Banks) (a) 778,800
----------------
SOUTH AFRICA - 0.89%
17,306 Liberty Life Association of Africa
(Insurance) . . . . . . . . . . . . . . . . 485,453
187,816 Persetel Holdings Ltd. (Computers-
Info Tech) (a). . . . . . . . . . . . . . . 1,172,655
81,015 Sasol Ltd. (Diversified) . . . . . . . . . . 865,956
----------------
2,524,064
----------------
SOUTH KOREA - 0.24%
66,950 Korea Mobile Telecommunications
(Telecommunications). . . . . . . . . . . . 686,238
----------------
SPAIN - 4.32%
15,100 Banco Popular Espanol (Banks). . . . . . . . 2,707,498
26,000 Fomento de Construcciones y Contratas
(Diversified) . . . . . . . . . . . . . . . 2,250,264
8,100 Gas Natural SDG (Utilities) (a). . . . . . . 1,771,179
244,400 Iberdrola SA (Utilities) . . . . . . . . . . 2,689,314
114,750 Telefonica de Espana (Telecommunications) (a) 2,764,134
----------------
12,182,389
----------------
SWEDEN - 1.71%
79,000 Nordbanken AB (Banks). . . . . . . . . . . . 2,726,416
107,700 Svedala Industries (Capital Equipment) (a) . 2,101,477
----------------
4,827,893
----------------
SWITZERLAND - 3.55%
2,330 ABB AG-Bearer (Capital Equipment). . . . . . 2,798,070
6,700 Adecco SA (Services) (a) . . . . . . . . . . 2,181,244
2,340 Novartis AG Bearer (Pharmaceuticals) (a) . . 2,912,411
6,800 Zurich Versicherungsgesellschaft
(Insurance) (a) . . . . . . . . . . . . . . 2,138,276
----------------
10,030,001
----------------
TAIWAN - 0.25%
28,130 Taiwan Fund, Inc. (Diversified). . . . . . . 692,701
----------------
THAILAND - 0.58%
67,300 PTT Exploration & Production (Energy) (a). . 1,000,108
169,000 Siam Makro Plc. (Retail) . . . . . . . . . . 644,119
----------------
1,644,227
----------------
UNITED KINGDOM - 10.45%
904,393 Avis Europe Plc. (Services) (a). . . . . . . 1,967,643
192,200 Barclays Plc. (Banks). . . . . . . . . . . . 3,222,198
158,000 British Aerospace Plc. (Aerospace) . . . . . 3,540,004
234,000 British Land Co. Plc. (Real Estate). . . . . 2,082,516
425,200 Colt Telecom Group Plc.
(Telecommunications) (a). . . . . . . . . . 2,080,571
323,400 Millennium & Copthorne Hotels Plc. (Leisure) 2,190,469
345,600 National Power Plc. (Utilities). . . . . . . 2,760,767
232,300 National Westminster Bank Plc. (Banks) . . . 2,618,562
679,700 Rolls-Royce Plc. (Aerospace) . . . . . . . . 2,544,634
449,500 Storehouse Plc. (Services) . . . . . . . . . 1,745,557
689,600 Thistle Hotels Plc. (Leisure) (a). . . . . . 2,106,121
256,200 United Utilities Plc. (Utilities). . . . . . 2,641,873
----------------
29,500,915
----------------
VENEZUELA - 0.73%
959,803 Electricidad de Caracas (Utilities) (a). . . 1,040,654
155,902 Mavesa SA, ADR (Consumer Goods) (b). . . . . 1,032,851
----------------
2,073,505
----------------
OTHER - 0.34%
63,500 Latin American Equity Fund
(Diversified) (a). . . . . . . . . . . . . 968,375
----------------
TOTAL COMMON STOCKS (Cost $218,121,540). . . . . . . . . . . $ 262,141,160
----------------
OTHER SECURITIES - 0.07%
HONG KONG - 0.03%
150,857 Guangnan Holdings Warrants (Food). . . . . . $ 83,712
68,273 Lai Sun Development Co. Ltd. Warrants
(Real Estate). . . . . . . . . . . . . . . 0
----------------
83,712
----------------
See Notes to Financial Statements on Pages 16 and 17
12
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
INDONESIA - 0.02%
167,500 Bank Dagang Nasional PT Warrants (Banks) . . $ 55,810
----------------
MALAYSIA - 0.02%
36,667 KFC Holdings BHD Warrants (Food) . . . . . . 59,157
----------------
TOTAL OTHER SECURITIES (Cost $15,910). . . . . . . . . . . . $ 198,679
----------------
PREFERRED STOCK CONVERTIBLE - 0.08%
SOUTH AFRICA - 0.08%
20,735 Sasol Ltd. PN (Diversified) (a)
(Cost $237,534) . . . . . . . . . . . . . . $ 218,115
----------------
CALL OPTIONS - 0.79%
JAPAN - 0.79%
275,000 Merrill Lynch Euro BS, Call Option, Strike
Price USD 95, Expires 12/30/97. . . . . . . $ 675,648
15,554,292 MLCBI Index, Call Option, Strike Price JPY
150, Expires 6/27/97. . . . . . . . . . . . 806,547
10,000,000 MS Double Yen Knockout, Call Option,
Strike Price JPY 127, Expires 6/20/97 . . . 25,309
649,973 Nikkei 225 Index, Call Option, Strike Price
JPY 20,326, Expires 6/27/97 . . . . . . . . 608,972
99,473 Nikkei 225 Index, Call Option, Strike Price
JPY 19,900, Expires 6/27/97 . . . . . . . . 126,203
----------------
TOTAL CALL OPTIONS (Cost $6,110,697) . . . . . . . . . . . . $ 2,242,679
----------------
Principal
Amount Description Value
--------- ----------- -----
CORPORATE DEBT NON-CONVERTIBLE - 0.70%
SOUTH AFRICA - 0.70%
$ 1,590,000 Liberty Life International, 6.50%, 9/30/04
(Finance) (Cost $2,033,855) . . . . . . . . $ 1,959,675
----------------
SOVEREIGN DEBT - 0.38%
ITALY - 0.38%
1,075,000 Republic of Italy, 5.00%, 6/28/01
(Finance) (Cost $1,082,622) . . . . . . . . $ 1,062,906
----------------
SHORT TERM INSTRUMENTS - 5.07%
U.S. TREASURY BILL - 5.07%
14,440,000 5.01%, 5/29/97 (Cost $14,318,915) . . . . . $ 14,319,729
----------------
TOTAL INVESTMENTS (Cost $241,921,073). . . . . . . . 99.98% $ 282,142,943
Other Assets Less Liabilities. . . . . . . . . . . . 0.02% 52,510
------- ----------------
NET ASSETS . . . . . . . . . . . . . . . . . . 100.00% $ 282,195,453
------- ----------------
------- ----------------
- --------------------
(a) Non-Income Producing Security
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. This Security may be resold in transactions exempt from registrations,
normally to qualified institutional buyers.
Industry Diversification (as a percentage of Total Investments):
Banks . . . . . . . . . . . . . . . . . . . . . 12.69%
Consumer Goods. . . . . . . . . . . . . . . . . 8.73%
Diversified . . . . . . . . . . . . . . . . . . 6.63%
Telecommunications. . . . . . . . . . . . . . . 6.24%
Utilities . . . . . . . . . . . . . . . . . . . 5.84%
Capital Equipment . . . . . . . . . . . . . . . 5.72%
U.S. Treasury . . . . . . . . . . . . . . . . . 5.08%
Autos . . . . . . . . . . . . . . . . . . . . . 4.91%
Services. . . . . . . . . . . . . . . . . . . . 4.75%
Oil and Gas . . . . . . . . . . . . . . . . . . 4.52%
Finance . . . . . . . . . . . . . . . . . . . . 4.28%
Materials . . . . . . . . . . . . . . . . . . . 3.63%
Leisure . . . . . . . . . . . . . . . . . . . . 3.55%
Food. . . . . . . . . . . . . . . . . . . . . . 3.49%
Insurance . . . . . . . . . . . . . . . . . . . 3.25%
Pharmaceuticals . . . . . . . . . . . . . . . . 3.18%
Real Estate . . . . . . . . . . . . . . . . . . 2.29%
Aerospace . . . . . . . . . . . . . . . . . . . 2.16%
Other*. . . . . . . . . . . . . . . . . . . . . 9.06%
-------
100.00%
-------
-------
* No one industry represents more than 2.00% of Portfolio holdings.
See Notes to Financial Statements on Pages 16 and 17
13
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment, at Value (Cost of $241,921,073) . . . . $ 282,142,943
Cash* . . . . . . . . . . . . . . . . . . . . . . . 1,739,477
Receivable for Foreign Taxes Withheld . . . . . . . 163,333
Dividends and Interest Receivable . . . . . . . . . 4,316,834
Prepaid Expenses and Other. . . . . . . . . . . . . 13,384
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . 288,375,971
---------------
LIABILITIES
Due to Bankers Trust. . . . . . . . . . . . . . . . 145,293
Payable for Securities Purchased. . . . . . . . . . 4,814,112
Unrealized Depreciation on Forward Foreign
Currency Contracts . . . . . . . . . . . . . . . . 1,226,696
Accrued Expenses and Other. . . . . . . . . . . . . 8,767
---------------
Total Liabilities. . . . . . . . . . . . . . . . . . . 6,194,868
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . $ 282,181,103
---------------
---------------
COMPOSITION OF NET ASSETS
Paid-in Capital . . . . . . . . . . . . . . . . . . $ 243,231,119
Net Unrealized Appreciation on Investments,
Foreign Currencies and Forward Foreign
Currency Contracts . . . . . . . . . . . . . . . . 38,949,984
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . $ 282,181,103
---------------
---------------
- --------------------
* Includes foreign cash of $1,723,174 with a cost of $1,716,430.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign withholding tax
of $161,137). . . . . . . . . . . . . . . . . . . $ 1,256,200
Interest. . . . . . . . . . . . . . . . . . . . . . 379,970
---------------
TOTAL INVESTMENT INCOME. . . . . . . . . . . . . . . . 1,636,170
---------------
EXPENSES
Advisory Fees . . . . . . . . . . . . . . . . . . . 708,133
Administration and Services Fees. . . . . . . . . . 163,415
Professional Fees . . . . . . . . . . . . . . . . . 7,866
Trustees Fees . . . . . . . . . . . . . . . . . . . 192
Transfer Tax. . . . . . . . . . . . . . . . . . . . 9,340
---------------
Total Expenses. . . . . . . . . . . . . . . . . . . 888,946
Less Expenses Absorbed by Bankers Trust . . . . . . (180,813)
---------------
Net Expenses. . . . . . . . . . . . . . . . . . 708,133
---------------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . 928,037
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD CURRENCIES AND
FORWARD FOREIGN CURRENCY CONTRACTS
Net Realized Gain (Loss) from:
Investment Transactions . . . . . . . . . . . . (1,448,657)
Foreign Currency Transactions . . . . . . . . . 3,976,229
Net Change in Unrealized Appreciation on
Investments, Foreign Currencies and Forward
Foreign Currency Contracts . . . . . . . . . . . . 19,139,976
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
FOREIGN CURRENCIES AND FORWARD FOREIGN
CURRENCY CONTRACTS. . . . . . . . . . . . . . . . . . 21,667,548
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . $ 22,595,585
---------------
---------------
See Notes to Financial Statements on Pages 16 and 17
14
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997+ SEPTEMBER 30, 1996
------------------- ------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net Investment Income . . . . . . . . . . . . . $ 928,037 $ 2,056,967
Net Realized Gain from Investment and
Foreign Currency Transactions . . . . . . . . 2,527,572 6,127,926
Net Change in Unrealized Appreciation on
Investments, Foreign Currencies and
Forward Foreign Currency Contracts. . . . . . 19,139,976 8,042,701
---------------- --------------
Net Increase in Net Assets from Operations . . . . 22,595,585 16,227,594
---------------- --------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested. . . . . . . . . 131,315,637 104,050,782
Value of Capital Withdrawn. . . . . . . . . . . (36,543,480) (38,778,446)
---------------- --------------
Net Increase in Net Assets from Capital
Transactions. . . . . . . . . . . . . . . . . . . 94,772,157 65,272,336
---------------- --------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . 117,367,742 81,499,930
NET ASSETS
Beginning of Period. . . . . . . . . . . . . . . . 164,813,361 83,313,431
---------------- --------------
End of Period. . . . . . . . . . . . . . . . . . . $ 282,181,103 $ 164,813,361
---------------- --------------
---------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected supplemental data and ratios for each of
the periods indicated for the International Equity Portfolio.
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE FOR THE PERIOD YEAR ENDED
SIX MONTHS ENDED YEAR ENDED JANUARY 1, 1995 TO DECEMBER 31,
MARCH 31, 1997+ SEPTEMBER 30, 1996 SEPTEMBER 30, 1995++ 1994 1993
--------------- ------------------ -------------------- -----------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period
(000s omitted) . . . . . . . . . . . $282,181 $164,813 $83,313 $56,042 $33,907
Ratios to Average Net Assets:
Net Investment Income . . . . . . . 0.85%* 1.76% 2.39%* 1.69% 1.64%
Expenses. . . . . . . . . . . . . . 0.65%* 0.65% 0.65%* 0.65% 0.65%
Decrease Reflected in Above Expense
Ratios Due to Absorption of
Expenses by Bankers Trust . . . 0.17%* 0.20% 0.22%* 0.24% 0.39%
Portfolio Turnover Rate . . . . . 29% 68% 21% 15% 17%
Average Commission per Share**. . $0.011 $0.010
</TABLE>
- -------------------------
+ Unaudited
++ On August 2, 1995, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
* Annualized
** For the fiscal years beginning on or after September 1, 1995, the portfolio
is required to disclose its average commission rate per share for security
trades on which commissions are charged.
See Notes to Financial Statements on Pages 16 and 17
15
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The International Equity Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as open-end management
investment company. The Portfolio was organized on December 11, 1991 as an
unincorporated trust under the laws of New York and commenced operations on
August 4, 1992. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. SECURITY VALUATION
The Portfolio's investments listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the closing price of the
security traded on that exchange prior to the time when the Portfolio assets are
valued. Short-term obligations with remaining maturities of 60 days or less are
valued at amortized cost. Other short-term debt securities are valued on a mark-
to-market basis until such time as they reach a remaining maturity of 60 days,
whereupon they will be valued at amortized cost using their value on the 61st
day. All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Trustees.
C. SECURITY TRANSACTIONS AND INTEREST INCOME
Security transactions are accounted for on a trade date basis. Dividend income,
less foreign taxes withheld, if any, is recorded on the ex-dividend date or upon
receipt of ex-dividend notification in the case of certain foreign securities.
Interest income is recorded on the accrual basis and includes amortization of
premium and discount on investments. Realized gains and losses from securities
transactions are recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security and foreign currency transactions of the Portfolio are
allocated pro rata among the investors in the Portfolio at the time of such
determination.
D. REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Advisers, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are deposited with
the Portfolio's custodian, and pursuant to the terms of the repurchase agreement
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Portfolio will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or the
seller defaults on its repurchase obligation, the Portfolio maintains the right
to sell the underlying securities at market value and may claim any resulting
loss against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
E. FOREIGN CURRENCY TRANSACTIONS
The books and records of the Portfolio are maintained in U.S. dollars. All
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of
investment securities, dividend and interest income, and certain expenses are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
F. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio may enter into forward foreign currency contracts for the purpose
of settling specific purchases or sales of securities denominated in a foreign
currency or with respect to the Portfolio's investments. The net U.S. dollar
value of foreign currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation are
determined using prevailing exchange rates. With respect to forward foreign
currency contracts, losses in excess of amounts recognized in the Statement of
Assets and Liabilities may arise due to changes in the value of the foreign
currency or if the counterparty does not perform under the contract.
G. OPTION CONTRACTS
Upon the purchase of a put option or a call option by a Portfolio, the premium
paid is recorded as an investment and valued at mark-to-market daily to reflect
the current market value. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sale transaction, the Portfolio will realize a gain or
loss depending on whether the sale proceeds from the closing sale transaction
are greater or less than the cost of the option. When the Portfolio exercises a
put option, it realizes a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Portfolio exercises a call option, the cost of the security which
the Portfolio purchases upon exercise will be increased by the premium
originally paid.
H. FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts which are contracts to
buy a standard quantity of securities at a specified price on a future date.
The Portfolio is required to deposit either in cash or securities an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the Portfolio each day, dependent on the daily fluctuations
in the value of the underlying security, and are recorded for financial
statement purposes as unrealized gains or losses by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
I. FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
J. OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements.
NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at
16
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
an annual rate of 0.15 of 1% of the Portfolio's average daily net assets. For
the six months ended March 31, 1997, this fee aggregated $163,415.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of 0.65 of 1% of the
Portfolio's average daily net assets. For the six months ended March 31, 1997,
this fee aggregated $708,133.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Portfolio, to the extent necessary, to limit all expenses to 0.65 of 1% of the
average daily net assets of the Portfolio. For the six months ended March 31,
1997, expenses of the Portfolio have been reduced $180,813.
Certain trustees and officers of the Portfolio are also directors, officers
and/or employees of Edgewood. None of the trustees so affiliated received
compensation for services as trustee of the Portfolio. Similarly, none of the
Portfolio's officers received compensation from the Portfolio.
For the six months ended March 31, 1997, the Portfolio paid brokerage
commissions of $500,794.
NOTE 3--PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the six months ended March 31, 1997, were
$150,227,408 and $58,698,797, respectively. For federal income tax purposes, the
tax basis of investments held at March 31, 1997 was $241,921,400. The aggregate
gross unrealized appreciation for all investments was $49,268,850 and the
aggregate gross unrealized depreciation for all investments was $9,047,307.
NOTE 4--OPEN FORWARD FOREIGN CURRENCY CONTRACTS
As of March 31, 1997, the International Equity Portfolio had the following open
forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE VALUE (US$) (DEPRECIATION) (US$)
- -----------------------------------------------------------------------------------------------------
SALES
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CHF 230,000 USD 159,756 4/02/97 159,656 100
CHF 43,572,000 USD 30,000,000 4/09/97 30,103,634 (103,634)
CHF 37,500,000 JPY 25,528,671 4/04/97 25,894,213 (365,542)
CHF 44,271,600 USD 30,116,735 5/27/97 30,742,032 (625,297)
DEM 50,817,000 USD 30,000,000 4/02/97 30,318,597 (318,597)
ESP 60,000,000 USD 417,304 4/01/97 422,357 (5,053)
HKD 3,000,000 USD 387,122 4/02/97 387,147 (25)
- -----------------------------------------------------------------------------------------------------
Total Sales (1,418,048)
- -----------------------------------------------------------------------------------------------------
PURCHASES
- -----------------------------------------------------------------------------------------------------
USD 30,318,597 DEM 50,817,000 4/02/97 30,129,847 188,750
USD 1,841,503 GBP 1,121,500 4/02/97 1,845,092 (3,589)
CHF 25,534,862 JPY 3,158,662,500 4/04/97 25,528,671 6,191
- -----------------------------------------------------------------------------------------------------
Total Purchases 191,352
- -----------------------------------------------------------------------------------------------------
Net Depreciation (1,226,696)
- -----------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
BT INVESTMENT FUNDS
BT INTERNATIONAL EQUITY FUND
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
--------------------
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or the BT
Mutual Fund Service Center at (800) 730-1313.
-------------------
